On Thursday, Wells Fargo (NYSE:WFC) maintained its Equal Weight rating on shares of Valero Energy (NYSE:VLO) but increased the price target to $184.00, up from the previous $171.00. The adjustment comes despite a slight reduction in the first-quarter earnings per share (EPS) estimate for 2024, attributed to lower Gulf Coast refining margins due to a turnaround on crude and other secondary units, as well as decreased ethanol margins.
The revised EPS forecasts for Valero Energy now stand at $3.24 for the first quarter of 2024, down from the prior estimate of $3.36, and at $16.54 for the full year 2024, slightly reduced from the previous $16.65. However, the firm noted that there is potential for upside in the first quarter's EPS due to possible lower operational expenses and better margin capture.
Wells Fargo's forecast for Valero's earnings in the fiscal year 2025 remains unchanged at $12.84 per share. The increased price target reflects a higher estimated refining EBITDA multiple, which the firm adjusted to 7.5 times from 7.0 times. This change in the multiple underpins the new price target for the energy company's stock.
Valero Energy, as an independent petroleum refiner and ethanol producer, has its performance closely tied to refining margins and operational efficiency. The analyst's comments suggest a cautious but stable outlook for the company, with specific reference to the operational factors influencing the first-quarter performance and the subsequent adjustment of the earnings forecast.
InvestingPro Insights
With Wells Fargo's recent price target update for Valero Energy (NYSE:VLO), investors may find additional context in the company's financial health and market performance. Valero's management has demonstrated confidence in the company's value through aggressive share buybacks, a strategy often seen as a positive signal about future prospects. Additionally, the firm has been a reliable dividend payer, maintaining payments for 36 consecutive years, which could appeal to income-focused investors.
Analysts have revised their earnings upwards for the upcoming period, indicating a potential positive shift in expectations for Valero's financial performance. Valero's stock is trading near its 52-week high, and recent returns over the last month and three months have been strong, with a 24.65% and 39.47% total price return respectively. These metrics underscore the company's robust recent performance in the market.
Valero's current P/E ratio stands at 7.28, reflecting a potentially attractive valuation relative to earnings. The company's revenue for the last twelve months as of Q4 2023 was $139.0B USD, although it experienced a decline in revenue growth during the same period. Despite this, the company's gross profit margin at 10.35% and its ability to cover interest payments with cash flows suggest a stable financial footing.
For investors seeking a deeper analysis and more InvestingPro Tips, such as insights into Valero's low price volatility and its position within the Oil, Gas & Consumable Fuels industry, consider exploring the additional 17 tips available on InvestingPro. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.